Analyzing the leverage effect in stock indexes with autoregressive generalized variance models
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Abstract
In developing and developed economies understanding the movement of stock market is extremely important to understand the riskiness of the investment, general behavior of the economy and taking the right position against the forthcoming financial events. In this study, the volatility of Turkish, Brazilian, German, London and New York Stock Indices are analyzed with ARCH type of modeling and the leverage effect is researched for the period between 04.01.2011 to 26.05.2015. There are two interesting results of this study. Firstly; it was seen that in all of those stock markets there is a leverage effect which means the negative movement in volatility is stronger than the positive one. Secondly the general structure of the ARCH type of modeling which explains the leverage effect shows similarity between those developed and developing markets.
Keywords: GARCH, TGARCH, leverage, stock exchange.
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